Last updated: 19 March 2014
In its recently released Hype Cycle for Financial Services Payment Systems report, Gartner gave warning of increasing payment card fraud in the U.S., highlighting EMV (‘chip and pin’) payment cards as the preferred solution.
According to Gartner, “U.S. banks should recognize that fraud will likely increase exponentially and with little warning. They should develop an EMV-centric contingency plan that involves not only EMV deployment for their payment card business, but also EMV enabling their automated teller machine networks and POS terminals. Any EMV deployment is likely to be aligned with mobile NFC deployments at the POS in the U.S.”
EMV cards are much more secure than traditional magnetic stripe cards because they contain a processing chip built directly into the card that enables advanced security features, like encryption and secure unique data, that are generated with each transaction.
Many European countries and Canada have seen a sharp reduction in card fraud due to EMV adoption. According the UK Card Association, upon implementation of EMV cards, counterfeit card fraud from skimming in the U.K. was reduced by 75% to an all-time low from 2007-2011.
While the rest of the world has been steadily adopting EMV technology, fraud has migrated to the U.S., effectively making the U.S. the “weakest link” in counterfeit card and POS transaction fraud.
Fortunately, migration to EMV payment cards has gained a lot of traction in the U.S. recently. Already millions of EMV cards have been deployed. More than 3.5 million Visa chip cards alone have been issued in the U.S. since 2011. Another major milestone that points to EMV adoption: much of the payment processing infrastructure has been upgraded to process the data-rich transactions that EMV chips enable.
The card brands have already taken the position that EMV is preferred way forward to reduce fraud at the point of sale. UNFCU issued the first EMV credit card in the U.S. in 2010. Since then, many of the major card issuers including Chase, Citi, Wells Fargo, US Bank, Bank of America, and others have begun to or announced plans to issue chip cards.
Merchant acquirers have integrated EMV into their roadmaps as well. As POS terminals are upgraded, EMV and NFC often go hand-in-hand because NFC-enabled terminals can process both mobile payments and EMV contactless chip cards, allowing merchants the flexibility to securely accept cash, EMV credit and debit cards, and mobile payments with one secure terminal.